Advance Auto Parts to Offload Worldpac for $1.5 Billion

Advance Auto Parts has announced plans to divest its Worldpac division in a $1.5 billion cash deal with Carlyle, according to Reuters. This strategic move aims to streamline the company’s operations, but it has also led to a significant downward revision of its annual earnings forecast. Following the announcement, Advance Auto Parts’ stock experienced a sharp decline of approximately 17%.

The sale of Worldpac, a wholesale parts distribution business that generated $2.1 billion in revenue for the fiscal year ending June 30, is set to close by the end of the year. Advance Auto Parts acquired Worldpac in 2014 as part of its purchase of General Parts International. The deal marks a notable shift as the company seeks to navigate a challenging macroeconomic environment and evolving retail landscape.

Advance Auto Parts CEO Shane O’Kelly highlighted the difficulties faced by the industry, noting that retailers are adjusting their expectations downward. Despite this, he expressed optimism about starting from a “lower baseline relative to the industry,” signaling a potential for recovery and growth under his leadership. O’Kelly, who took over the role last year, has been working to turn around the company’s performance amid pressures from activist investors who advocated for the sale of Worldpac.

In a statement, Wes Bieligk of Carlyle’s Global Industrials investing team described Worldpac as a valuable asset within a corporate structure, noting its focus on the professional market and repair shops. Bieligk emphasized Carlyle’s intent to support and enhance Worldpac’s operations, citing its economic resilience and long-term growth potential as key factors in the investment decision.

In addition to the Worldpac sale, Advance Auto Parts has revised its 2024 financial outlook. The company now projects net sales to fall between $11.15 billion and $11.25 billion, a decrease from earlier estimates of $11.3 billion to $11.4 billion.

Source: Reuters